EM bond funds sees first outflow since January as $56 million leaves the space: EPFR Global

By Rebecca Melvin

New York, Aug. 17 – Emerging market bond fund flows reversed course for the first time since January, with investors taking money off the table and snapping a 28-week run of inflows, according to data tracker EPFR Global.

For the week ending Aug. 16, there was a $56 million outflow, compared to a $1.29 billion inflow for the previous week.

Dollar- and euro-denominated emerging market bond funds saw an outflow of $166 million for the week to Aug. 16, while local currencies saw an outflow of $51 million. These outflows were tempered by mostly inflows for funds with mixed mandates.

“It was a bumpy week, with some serious background noise from the Korean peninsula, which was a small part of it; but as much as anything, it seems to be part of a summer pattern,” Cameron Brandt, EPFR Global’s director of research, told Prospect News.

With investors turning their attention away from markets for the second part of August, they may have wanted to trim positions, Brandt said. In addition there was brief period of concern over a possibly faster pace of central bank rate tightening that likely contributed to the outflow. But those concerns have subsided after the release of central bank minutes this week that show policymakers have their eyes trained on weak inflation numbers that could curb rate increases.

Brandt said flows will likely be lower again next week but suspected strength would return after that.

“It’s not a massive swing, and not unusual to see a housekeeping week or two,” after a long run of pretty strong inflows, Brandt said.

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